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'Club Med' blocks EU deal with tsunami-hit countries

TIMES ONLINE March 21, 2005, By Carl Mortished, International Business Editor

HOPES of a quick deal to end EU trade barriers for the tsunami-ravaged countries of Asia have been dashed after Italy and France blocked reform plans.A campaign by the European Commission to secure preferential tariffs for Sri Lanka and other Asian countries that export textiles to the Continent has been obstructed by member states fearful of a surge in cheap clothing imports.

Peter Mandelson, the EU Trade Commissioner, has criticised EU governments after their meeting last week ended in deadlock, scuppering hopes of the introduction of zero tariffs for Sri Lanka from April 1.The debate over reforming the EU’s general system of preferences (GSP), which grants special market access to the poorest nations, ended in a stalemate between northern European states, which argued in favour of a more generous regime, and southern European states, the so-called Club Med, which have significant textile industries.In his report to a committee of the European Parliament, Mr Mandelson said: “I regret that . . . in some cases, member states said explicitly that Europe should put domestic interests above all else, before the interests of developing countries in the current economic climate.”Calls for urgent reform of the GSP are loudest in the poorer Asian nations, such as Sri Lanka and Bangladesh, which fear competition from China. In January quotas restricting imports of textiles were abolished worldwide by the World Trade Organisation. This created free access for all in a market that was once managed in a complex system of special access agreements doled out to poorer nations. Studies conducted by the WTO suggest that China, unfettered, could capture almost half the world’s textile markets.The proposed trade reforms would deny low tariffs to countries that hold more than 12.5 per cent of the EU textile market, notably China, while smaller exporters, such as Sri Lanka, would pay almost no tariffs provided that they comply with environmental and labour standards.But Italy, Portugal and France wanted an even lower market share threshold of 10 per cent, arguing that India should also lose preferred access.Mr Mandelson rounded on those seeking a restrictive regime, pointing out that the failure to agree left Europe with the worst outcome. He said: “Who are the main casualties? The tsunami-affected countries and Europe’s textile sector.“The proposal I have made sees China ending its preferential access to the European market and that was blocked.”The GSP reforms will now be debated by a lower EU committee and will not be considered again until late next month. Clothing is a major industry in Sri Lanka, employing 250,000 and representing half of the island’s economy.